WASHINGTON (AFP) - Peter Diamond's nomination to the powerful US Federal Reserve board was stymied this year by a lone Republican lawmaker, but the longtime MIT professor has had the last laugh -- by winning the 2010 Nobel prize for economics.

Diamond -- reportedly a one-time mentor of the Fed's current chairman Ben Bernanke -- shared the award with fellow US economics professor Dale Mortensen of Northwestern University and British-Cypriot Christopher Pissarides "for their analysis of markets with search frictions," the Nobel jury said on Monday.

Their research models, the Sweden-based committee said, "help us understand the ways in which unemployment, job vacancies, and wages are affected by regulation and economic policy."

Such labor analysis was likely a primary factor in President Barack Obama's decision early this year to nominate Diamond to one of seven seats on the Fed's board of governors and its Federal Open Market Committee, which influences economic activity and inflation by setting important interest rates.

Diamond, 70, is widely considered a world authority on labor analysis, but Senator Richard Shelby, Republican of Alabama, blocked his nomination in August.

"Professor Diamond is an authority on tax policy and social security," Shelby told the Washington Post.

"It is not clear, however, that his background is ideally suited for monetary policy, especially given the current challenges facing the Fed."

Those challenges are exactly why Diamond was so needed by the administration, according to none other than Paul Krugman, a fellow Nobel economics laureate.

In a sharply worded piece in The New York Times, the economist-turned-columnist described Diamond as writing "the seminal paper on the whole subject" of the relationship between unemployment and the job vacancy rate.

The Nobel committee appeared to side at least in theory with Krugman, awarding Diamond the prize Monday along with Mortensen and Pissarides.

Mortensen, 71, is a pioneer of job search theory and penned "Wage Dispersion: Why are similar people paid differently" in 2003. His has taught economics at prestigious universities around the world.